Japanese Automakers in Mexico and Canada Face Tariff Threat from Trump
Japanese automakers and their suppliers with production bases in Mexico and Canada are facing the possibility of hefty tariffs after Donald Trump takes office in January. In a social media post on November 25th, the U.S. president-elect vowed to raise tariffs on imports from the two countries to 25 percent.
This potential policy shift could have significant implications for companies like Toyota, Honda, Nissan, and Mazda, all of which operate production plants in Mexico, where labor costs are relatively low. These companies export a substantial portion of their vehicles built in Mexico and Canada to the United States, taking advantage of the United States-Mexico-Canada Agreement (UMCA). This trade agreement, which took effect in 2020, exempts imports and exports among the three countries from tariffs under certain conditions.
The potential tariffs could also impact parts and materials suppliers and other auto-related companies in Mexico and Canada. At Honda, for example, about 30 percent of the vehicles sold in the United States in fiscal 2023 were produced in either Mexico or Canada. Executive Vice President Shinji Aoyama has expressed concern about the potential impact of tariffs, stating that the company will resort to lobbying and other efforts to address the situation.
Nissan, which recently announced plans to shed 9,000 workers and reduce global production capacity due to lackluster performances in the United States and China, could also be further impacted by high tariffs on imports from Mexico. About 26 percent of the approximately 915,000 vehicles sold in the United States in fiscal 2023 were manufactured at its four plants in Mexico.
Other companies, such as Mitsui Chemicals Inc. and Denso Corp., which produce plastics for auto parts and air conditioners respectively, are also monitoring the situation closely. They acknowledge the potential impact of increased tariffs on their operations and are prepared to adjust their strategies as needed.
With Trump's inauguration just around the corner, the future of trade between the United States, Mexico, and Canada remains uncertain. Japanese automakers and their suppliers are closely watching developments and preparing for potential changes in policy that could significantly impact their businesses.